As China’s National Bureau of Statistics has announced the manual CPI to hit 1.5 percent the AUD/USD pair drops to 0.7430 price level. The CPI came out higher than the last one and as well the street anticipation was 0.9 and 1.2 percent.
At the same time, China’s PPI(producer price index) hits 8.3 percent, which is above the anticipated 7.9 percent but still below the last release of 8.8 percent.
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This will prevent the PBOC(People’s Bank of China) from choosing to use a loose monetary policy. PBOC has maintained the interest rate at 3.7 percent since two months ago. They even reduce LPR(loan prime rate) by 10bps in the first month of the year. Since Australia is a big exporter to China their relationship varies directly with Chinese policy. High inflation will likely reduce anticipations of a loose monetary policy, which will affect the Australian economy.
During this, the dollar index (DXY) seems to recover 100s following an undesirable starting gap today(Monday). The dollar index has bounced back suddenly as investors are gambling on the high part of the inflation release and ultimately, a raised interest rates judgment by the Fed( Federal Reserve System) next month (May).
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